BP Panel Allows Congress to Act on Vow of Comity: Albert Hunt

Jan. 24 (Bloomberg) -- Republicans and Democrats are
planning to sit together during President Barack Obama’s State
of the Union address tomorrow night. That might minimize the
raucous high school-like cheering sections that have come to
mark these sessions.

As a vehicle for finding common ground, this is mere
symbolism. More telling moments may occur the next day in the
less ornate hearing rooms of the House Natural Resources
Committee and the Senate Energy and Natural Resources Committee.

Republican and Democratic lawmakers will hear testimony
from the co-chairmen of the commission investigating the BP
disaster last year in the Gulf of Mexico, former Democratic
Senator Bob Graham of Florida and Bill Reilly, a Republican who
once headed the Environmental Protection Agency.

Earlier this month, the commission, appointed last May
after the biggest oil spill in U.S. history, called for an end
to the cozy relationship between government regulators and the
oil industry via the creation of an independent agency that
would be more shielded from political pressure. If regulators
and London-based BP Plc had done their job right and put safety
first, the spill wouldn’t have occurred, the Graham-Reilly panel
concluded.

At the same time, however, it said the U.S. needs the oil
from offshore drilling, and that while the liability cap on
companies for accidents should be raised from the
unrealistically low $75 million, it shouldn’t be unlimited.

Balanced Report

The reaction from the White House to the proposal was
muted, if mildly supportive. The findings got pretty good
reviews in Louisiana; Democratic Senator Mary Landrieu said she
was “grateful” that such a balanced report was produced.

Activists and some politicians, on both sides of this
divisive issue, weren’t as generous. The political left was
distressed that the commission didn’t come out for banning off-shore drilling, or eliminating, not simply raising, the
liability cap for oil companies.

“If we let the oil companies keep drilling off our oceans,
eventually we’ll lose all our beaches and our fisheries,” said
Andrew Sharpless, the chief executive officer of Oceana, an
ocean-conservation advocacy organization in Washington.

The industry and the political right, including some top
House Republicans, were displeased by calls for more spending on
safety protection and especially on more federal regulation.
Michigan Representative Fred Upton, the new chairman of the
House Energy and Commerce Committee, said his panel would look
at the report, while suggesting it was incomplete, leaving
“unanswered the fundamental question of what went wrong.”

One Rogue Company

Much of the industry complained that in calling for tougher
regulation generally, the bipartisan commission painted with too
broad a brush, that the problem was one rogue company, BP, and a
single incident.

“This does a great disservice to the thousands of men and
women who work in the industry and have the highest personal and
professional commitment to safety,” said Erik Milito, the
director of upstream and industry operations at the American
Petroleum Institute in Washington.

There were legitimate critiques. One of the most
interesting was from Ben Heineman Jr., the former general
counsel for General Electric Co., who, in an article in the
Harvard Business Review, said the commission gave the BP board
of directors a pass on their inadequate oversight. Also, without
subpoena power, the commission was unable to get some
potentially important specifics about the incident.

‘Systemic’ Problem

In interviews last week, both chairmen of the seven-member
commission said they went into the task thinking BP was a rogue
company, and came out believing the accident reflected a
broader, “systemic” problem for the regulators and the
industry. The report concludes that Halliburton Co., which BP
contracted to seal the well with cement, and Transocean Ltd.,
the owner and operator of the Deepwater Horizon rig, were more
culpable than initially thought.

“It’s implausible that Halliburton only would give faulty
cement to one operator, or that Transocean would fail to detect
a faulty rig on only one operator’s platform,” Reilly said.

Further, Graham, who also was once governor of Florida,
highlights the broader public interest in regulating offshore
activities: “This is private enterprise operating on publicly
owned property. The government has an interest as a regulator
not only for environmental safety and protection, but also as a
landlord to see that its property is not trashed.”

Gulf Seafood Industry

Beyond the environmental havoc BP caused, there was severe
ancillary damage, they said. For the Gulf seafood industry,
business dropped about 30 percent in the aftermath of the spill.

For U.S. Interior Department regulators, the Graham-Reilly
commission’s plan would end the “co-mingling” of two distinct
missions -- promoting rapid energy expansion and ensuring
safety. The commission also calls for raising the limit on
industrywide contributions to the Oil Spill Liability Trust
Fund, which pays damages from an oil spill above the liability
limit of the company that caused the incident. Eighty percent of
any penalties would be devoted to cleaning up the Gulf, which
has been environmentally ravaged for decades.

To the dismay of some environmentalists, the commission
said the more important issue was safer offshore drilling, not
cessations or moratoriums. It noted that offshore oil resources
currently generate about one-third of U.S. production and
contain more technically recoverable resources than all on-shore
and shallower-water resources combined.

‘Major Source of Domestic Petroleum’

“Offshore will be a major source of domestic petroleum for
the foreseeable future,” Graham said.

Partisan battles in U.S. politics often are inevitable and
healthy. If both Republicans and Democrats frame comprehensive,
competing health-care proposals, and deficit-reducing budgets
and specific job-growth plans, it will constructively frame
these issues for voters.

There are, however, occasions where it’s good for both
sides to come together, as is evidenced in the favorable public
reaction to deals cut on economics, arms control and social
issues in December. The Reilly-Graham commission offers a
starting venue for another such opportunity. As memory fades of
the tragic consequences of the Deepwater Horizons rig explosion
last April, Reilly reminds us there’s another reason for
Congress to act on these recommendations: “The reality is this
could happen again.”

(Albert R. Hunt is the executive editor for Washington at
Bloomberg News. The opinions expressed are his own.)